The Strategy Corner

BY XAVIER VAN DE LANOTTE

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Future Vision
Once the mission is defined in terms of how the corporation affects (improves) customers’ lives, the foresight of future benefits sought by customers will be the guiding force behind product, service and relationship innovation. Mastering the ability to develop new products and services is a key competitive differentiator and growth operator. Yet, more importantly, companies must understand that the promise of life-altering experiences is not quite the same as life-altering experiences. Future vision is about more than projecting brilliant ideas into clever product or service packages. It’s about enabling customers to effortlessly and seamlessly experience these ideas. The key for this to operate to the corporation’s advantage is to both: Continuously reassess the core competency requirements it must meet, and demonstrate value chain and industry leadership characteristics. Successful companies are not the ones that focus on the Six Sigma management philosophy and that alone. Rather, they are the ones that take the service components (quite distinct from manufacturing and product development functions) to a new level. They demonstrate the ability for industry stakeholders to take note and embrace their initiatives, thereby setting the trend for, and shaping the future of their industry. 

Organization
The discipline of organizational design can be one of the most complex tasks, yet it is one of the most powerful differentiators management has in its arsenal of competitive tools. Organization meshes values, channels of communication, key processes and lines of command. It establishes the corporation’s ability to access the right (internal and external) resources and expertise at the right time and in the most efficient manner. Design combines formal and informal structures, balanced to allow core competencies to strengthen while leaving room for adjacent competencies to emerge. Organization must provide clarity so as not to lose sight of the priorities and the capabilities required in pursuit of the strategic goals. Adequate communication of the goals and instauration of healthy value systems allow employees and organizational units to be the agents of change, not the subjects of change. Design becomes an ongoing process throughout the corporation, establishing the linkages that promote synergy, capability and leverage. Like a self-organizing organism, the corporation becomes aware of how to most effectively deploy its resources at all times. Finally, as corporations are not self-sustaining, the organization shapes itself to best fit within its environment; i.e.: Its markets, its value chain and its industry. It takes its cues from the environment, assimilates them with its strategy and adapts to formulate the optimal competitive response. The degree with which organizations can engage in collaborative efforts at the various levels within its environment (hence extending the organization beyond the confines of the corporation) is perhaps the ultimate characteristic that distinguishes the successful growth organization from the “dinosaur.”

Technology

1.   the branch of knowledge that deals with industrial arts, applied sciences, engineering, etc.

2.   the practical application of knowledge

(The Random House Dictionary)

Technology lies at the root of transformation and change that stimulates growth. It makes new products and services more appealing with new features and functionality, and more affordable with improved productivity. Today, we can dream about all sorts of products and capabilities which rely on forward-looking technologies. But for most of us, the technologies embedded in our consumption of goods and services are just the practical application of knowledge. Technology should not sway consumers one way or another, as long as the goods and services meet the desired outcome. Successful growth companies have the uncanny ability to soak it up through acquisition, development and convergence, and smoothly incorporate it in their products and services and apply it to the execution of their processes and the management of their organization. To move the company forward, both areas of technological application are as essential as water is to the steam locomotive. But in the end, it is not the complexity of the technology that matters, but the creation of something that is practical, and that produces the intended outcome with the least amount of effort (and cost). The point about technology is that for most companies, technology is not the main object of what they do, but it is the conscientious decision of how they are going about their business; technology is the enabler and a key differentiator. In that respect, companies must decide on a policy for the adoption of new technologies, sourcing of capabilities, which standards to adopt, and whether to develop open or closed proprietary systems. Implications of their position, in turn, affect the processes with which they disseminate information, train their personnel, provide support to their customers, educate the markets, and ultimately how they go about integrating their offerings with other products and services in the value chain.

These four areas are highly intertwined and constantly influence one another; in reality, they are a reflection of each other. Through them, much can be said about a corporation’s capabilities and potential for future growth and success. If the ultimate objective for strategy is to gain a competitive advantage in the market and profit from it, then strategy must account for the transformation of these key areas and ensure that the corporation meets the required capabilities to achieve its goals. Let’s look from a methodology perspective how strategy should solidify its foundation. Think of it as the three dimensional relationship between current state, path of transformation and strategic fit.

The baseline of a strategy encompasses the view of where the company is coming from, where it currently is and where it should be now with respect to the four areas. Any gap in the current state of these areas with where they ought to be, or weakness in their ability to progress toward an expected future state, should be addressed. Based on the rate with which the organization can assimilate change, for each area the priorities, guidelines and objectives should be established. But more importantly, the corporation needs to have in place effective change processes that will transform and prepare its future capabilities from within.

Quite often changes hit an organization abruptly and en masse, or are scheduled to be rolled out in phases over a period of time. This is very characteristic of vertical (top-down) and highly centralized management structures. As a consequence, change causes disruption and counterproductive behavior as it may be too significant (or sustained too frequently) for the organization to adequately assimilate it. However, when change management processes are delegated to lower hierarchical levels, the organization can more rapidly adapt to the new environmental requirements. Transformation becomes a continuous process, the incremental changes are easier to assimilate, they are often met with less resistance and cause less friction, and a significant time advantage can be achieved. Furthermore, change occurring spontaneously throughout the corporate structure promotes the development of intra-organizational linkages and with it, enhances the ability to effectively leverage the available resources and learn across organizational lines.

When ongoing changes are in fact occurring throughout the corporation at various levels of the organization, it is advised to perform a periodic congruence check. The senior management and strategy teams need to ensure that the ongoing transformations occur in sync and converge with the strategic objectives. It is also advised to verify whether crossover of beneficial changes occurs in between organizational units. The emphasis by management is not so much the change as it is the process of change. Hence it is important that communication of directions and objectives be emphasized. As a result, individual and team objectives shift from the mere measurement of output to the measurement of effective transformation of functional capabilities for future production at greater output levels, with greater quality achievement and at an overall lower cost. 

SO WHAT?
Lately the debate in the media and the political scene is zooming into the issue of job loss due to outsourcing, automation and productivity gains. Whether we like it or not, this is a phenomenon (and trend) which has become part of the global economic system. One must understand though, that those actions can actually be very good for the economy and can stimulate long-term economic growth when they occur under the right circumstances and for the right reasons. Joseph Schumpeter said: “The proper role of a healthy functioning economy is to destroy jobs and put labor to use elsewhere.” Yet, this supposes that throughout their transformation cycles corporations can retrain, refocus and redeploy their resources into more productive jobs and functions. Cost cutting measures will help us achieve greater output and consumption through the reduced pricing of goods and services, but effective growth can only be achieved if we can sustain, or grow above, a healthy level of employment.

So the capital question becomes: After we have turned the corner of the latest recessionary trend characterized by heavy cost cutting and organizational downsizing, does your corporation still dispose of the resources and proper foundation to develop and execute effective growth strategies? How do you generate new ideas, what’s on the horizon for your firm, how do you develop new products and services, what do you do to execute on your promise to provide your customers with life-altering experiences, how do you keep your organizations in sync with your objectives, and what technologies are you pursuing to strengthen your competitive advantages.

The capitalistic society is based on opportunity and the spirit of entrepreneurship; is your organization today in a position to manage that process to your advantage? After all, we share the ultimate stake, and the ultimate responsibility, in protecting our economy. For that we must innovate and ensure continued growth. Carpe diem!

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Xavier Van de Lanotte is the president of VXTConsulting, Inc. Xavier advises telecommunication services and equipment firms on Competitive Strategy, Customer Value, Alliance Management, and Distribution and has worked in this industry in various parts of the world for 15 years. For more information on value chain management, please visit us at www.vxtconsulting.com, or contact us at [email protected]. We welcome your questions and thoughts about this article.

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